Area nonprofits lose tax exempt status

Monday

?More than 500 nonprofit organizations in Bucks and eastern Montgomery counties have had their nonprofit status revoked for failing to comply with new requirements to file tax documents.

While the Internal Revenue Service said the vast majority of organizations on that list — which totals 275,000 nationwide — are no longer in existence, the groups that are still in business are scrambling to regain their nonprofit status or explain why they’re on the list in error.

“I’m hopeful it’s not going to affect us much,” said Linda Goodwin, executive director of the Bucks County Foundation, which is still a functioning nonprofit even though it’s on the list.

But, she added: “If somebody sees (the list), I see somebody having a question.”

The Pension Protection Act, passed by Congress in 2006, requires most tax-exempt organizations to file an annual information return or notice with the IRS. Small organizations, which previously hadn’t been required to file tax documents, had to do so for the first time in 2007.

The law automatically revokes the tax-exempt status of any organization that doesn’t file the required returns or notices for three consecutive years. Time ran out for those organizations at the end of May, and the list was published earlier this month.

“Since the passage of the Pension Protection Act in 2006, the IRS has made a concerted effort to contact and educate administrators of charitable organizations about their filing requirements,” said IRS spokeswoman Jennifer Jenkins. “We believe that the vast majority of the organizations on the recent automatic-revocation list are defunct — some perhaps for awhile.”

While the revocation cannot be overturned, the IRS has set up a process to help organizations refile for their tax exempt status, which would be retroactive. Organizations who had their status revoked, and who have less than $50,000 of gross receipts in 2010, can apply to regain their status for a reduced fee.

Donors who made what they thought were tax-deductible contributions to organizations prior to the list’s publication will still be able to deduct the donation on their taxes. But going forward, organizations that don’t regain their tax-exempt status won’t be eligible for tax-deductible contributions. Their income may be taxed, and donors can’t claim the contributions on their federal tax returns.

“Given the volume of organizations involved, we realize that some listed organizations may feel that their tax-exempt status should not have been revoked,” Jenkins said. “We ask that any such organization contact the IRS so that we may work to resolve the organization’s issue.”

Drew Ferrara, president of LeTip of Newtown, said the business networking group hadn’t been aware of the filing requirements. It’s now on the revocation list.

“I’m curious as to why certain LeTips weren’t on the list,” he said. “I don’t even know what our treasurer’s going to do to fix it.”

The Smiles for Jake Foundation, a Doylestown pediatric cancer organization founded in memory of Jake Paternoster, applied for federal tax-exempt status but then decided not to seek it, said Mike Paternoster, a co-founder of the group.

“It was more trouble than it was worth,” said Paternoster, who added that the group maintains a nonprofit status with the state. “It’s funny we’re on that list.”

For the Bucks County Foundation, the list is just a headache, Goodwin said.

The foundation, established in 1979, is a charitable trust that oversees scholarship programs and other funds usually left by Bucks County residents in their wills. It’s had its nonprofit status since 1981, Goodwin said. In 1983, someone applied for a second Employer Identification Number. That second number — which was never used, and is attached to a P.O. Box that doesn’t belong to the foundation — is the one on the list.

“We still are a valid 501(c)(3),” Goodwin said. “I’m not sure what one does to get one’s name off this. It should have just been cancelled. Then this list got printed and here we are.”

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